Mixed Long and Short Positions in Asian Offshore Market, Yangshan Copper Premiums Peak and Pull Back [SMM Yangshan Copper Weekly Review]

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This week (May 12-16), the weekly average price range for Yangshan copper premiums B/L transactions was $106.8 to $123.2/mt, with QP June and an average price of $115/mt, down $0.75/mt WoW. The price range for warrants was $94.4 to $104.4/mt, with an average price of $99.4/mt, down $1.85/mt WoW, QP June. The CIF B/L price for EQ copper was $74 to $86/mt, with an average price of $80/mt, up $5.75/mt WoW, QP June. As of May 16, the SHFE/LME copper price ratio for the SHFE copper 2506 contract was 8.175, with an import profit/loss of around -700 yuan/mt. As of Thursday, the LME copper 3M-Jun was in backwardation of $35.13/mt; the spread between the June date and July date swap fees was in backwardation of $17.27/mt.

Currently, the actual price for high-quality ER copper warrants is $100/mt, mainstream pyrometallurgical copper is $95/mt, and SX-EW copper is $90/mt. The price for high-quality copper B/L is $120/mt, mainstream pyrometallurgical copper is around $112/mt, and SX-EW copper is $102/mt. The CIF B/L price for EQ copper is $74 to $86/mt, with an average price of $80/mt.

This week, the market was influenced by a mix of bullish and bearish news, with Yangshan copper premiums peaking and then declining. Due to the attractive high backwardation structure on SHFE, it is expected that a large volume of B/Ls will flow into the domestic market from bonded areas and LME cancellations from late May to early June. The anticipation of concentrated import arrivals has increased market selling sentiment. Although EQ B/L quotes remain high, the transaction prices for registered cargoes have shown a clear downward trend. Mid-week, both INE and LME structures expanded, with the INE price spread between futures contracts exceeding 1,000 yuan/mt on the contract rollover day. Coupled with the continued appreciation of the RMB exchange rate, the import price ratio is expected to decline in the short term. Looking ahead, although the CIF China copper cathode premiums are under pressure, the overall supply in Asia remains tight: According to SMM, large downstream enterprises in India have started to purchase domestic copper cathode B/Ls due to tight supply, and market rumors suggest that production at two smelters in Asia has decreased. With a mix of bullish and bearish news in the offshore market, it is expected that Yangshan copper premiums will face difficulties in rising in the short term, but there is still support at the bottom.

According to the SMM survey, as of Thursday (May 15), copper inventories in domestic bonded areas decreased by 8,000 mt from the previous period (May 8) to 68,800 mt. Specifically, bonded copper inventories in Shanghai decreased by 7,500 mt to 66,000 mt, while those in Guangdong decreased by 500 mt to 10,300 mt. The continuous decline in bonded area inventories this week was mainly due to the attractive high backwardation structure on SHFE before delivery. As the SHFE/LME price ratio improved last week, and there was a significant gap between domestic deliverable inventory and the open interest of the SHFE copper 2505 contract, a large amount of bonded area cargo was attracted to flow into the domestic market. Meanwhile, some INE warrants were also converted into SHFE registered warrants. Looking ahead, it is expected that the inflow of cancelled warrants on the LME will increase in late May. Coupled with an important industry conference to be held next week, spot trading volume is expected to decline. It is anticipated that bonded area inventory will stop falling in the short term

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